Global capital markets had a mixed week and came out marginally in the green. The U.S. stock market got off to a slow start to the week, but recovered half way through as the S&P 500 crossed the 5,500 mark. The highest gainer was the technology sector once again. Signs of economic slowdown and the most recent unemployment data pushed up the Treasury bond yields during the week. In Europe, capital markets were still celebrating the rate cut announced by the ECB last week and a 25 bps cut by the Swiss Central Bank at the start of the week. However, as political turmoil gripped France and Germany announcing a slowdown in business activity, the European stock market lost ground and eventually posted a small gain. There are growing fears that the European IPO market is unlikely to see any new candidates until after the summer. In geopolitical news, Israeli forces continued their assault in Rafah and other areas across the Gaza Strip, while missile intercepts over northern Israel and fires from air strikes in southern Lebanon compounded fears that the Gaza war may be expanding into a wider conflict. Russia has expressed its openness to have security talks with the U.S. provided they must be comprehensive and include the subject of Ukraine.

Global Updates
  • The MSCI All Country World Index edged upwards overall, after a week marred with volatility. 
  • In the latest release of economic data, first-time applications for U.S. unemployment benefits fell moderately last week, while new housing construction dropped to the lowest level in nearly four years in May, suggesting that U.S. economic activity remained moderate in the second quarter.
  • The European markets rallied at the start of the week as the Swiss National Bank became the latest developed economy central bank to cut interest rates by 25 basis points to 1.25%. Towards the end of the week, French and German economic survey data came in weaker than expected, supporting expectations for policy rate cuts. In addition, Eurozone business growth decelerated sharply in June as demand fell for the first time since February.
  • The Bank of England kept its policy rate unchanged but was hopeful of rate cuts soon with inflation reaching the benchmark of 2%. The country’s consumer confidence indicator rose for the third consecutive month, exceeding expectations following UK inflation returning to the target inflation rate of 2%.
  • WTI crude futures trended up for the second week topping $81 per barrel on escalating conflicts and declining U.S. crude stocks.
  • The Shanghai composite index trended down for the sixth straight week owing to an imbalanced economic revival in China. 
  • Japan’s inflation rate rose to 3-month high with energy subsidies completely ending. The yen weakened again, forcing Japan to act against currency speculators. Japan’s PMI also fell with price stress and a fall in new export orders.
  • Sweden’s financial supervisory authority has fined Nasdaq Stockholm $9.6 million for not complying with bourse rules at several occasions in recent years.
  • The World Gold Council predicts 30% of world’s central banks will enhance their gold reserves with increasing pessimism in a dollar based global economy.
U.S. Equity
  • The S&P 500 & Nasdaq ended higher this week led by jumps in high-cap technology stocks Nvidia, Dell, Super Micro Computers and Accenture on AI-based positivity. The main sectors of growth were technology, energy, utilities and financials. 
  • Dell Technologies and Super Micro Computer stocks rose with Elon Musk’s announcement that the companies will design the hardware for his startup xAI. Accenture’s stock also gained with a surge in AI related bookings and higher-than-expected third quarter profits. 
  • Minneapolis Federal Reserve President Neel Kashkari announced that the Fed would implement a single rate cut by the end of this year according to their median forecasts. 
  • The U.S. government opened up competitive bidding for $850 million in grants to help small oil and gas producers monitor and reduce methane from their operations, a major part of the Biden administration’s plan to crack down on leaks of the potent greenhouse gas.
  • Goldman Sachs has raised the year-end target to 5600 for the S&P 500 citing strong earnings growth by five mega-cap U.S. tech stocks and a higher fair value price-to-earnings ratio multiple.
  • America’s largest technology focused ETF, The Technology Select Sector SPDR Fund, will quadruple its holdings of Nvidia’s stock to replace Apple stock in its quarterly rebalancing. 
  • Renewable energy provider ‘NextEra Energy’s’ stock dropped after announcing sale of equity units worth $2 billion, to repay debt and fund new projects.  
  • Tesla sued its EV battery supplier for disclosure of trade secrets in an improperly filed patent application. EV startup Fisker has filed for bankruptcy, failing to restructure. 
  • Honeywell International stock gained after the company completed the purchase of advanced defense electronic systems’ manufacturer CAES Systems for $1.9 billion.
  • Pharma manager Gilead’s stocks surged after significantly positive results in the phase-3 trials of HIV drug, Lenacapavir.
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U.S. Fixed Income
  • The Bloomberg U.S. Aggregate Bond Index rose marginally this week with aggressive rallies by tech stocks offering investors profitable options. 
  • The U.S. 10-year Treasury yield rose to 4.22% and the yield on the 2-year note reset to 4.69% over the week.
  • The U.S. Dollar Index marginally ended the week at 105.54.
  • According to Securities Industry and Financial Markets Association data, the U.S. Treasury market has more than doubled over the past 10 years, from $12.5 trillion in 2014 to $27 trillion at the end of May. Going forward, federal debt could grow to $48 trillion by 2034.
Sources

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